Indiana first-time homebuyer grants and down payment assistance (2026)

IHCDA’s three purchase programs in 2026

IHCDA’s October 2026 program guide lists four programs. Three are for buying a home, and all run statewide on 30-year fixed FHA or conventional (Fannie Mae or Freddie Mac) loans ⁠¹⁠².

• First Step is bond-funded. It adds 5% down payment assistance, based on the lower of the price or the appraised value, to a below-market first mortgage. You must be a first-time buyer, a qualified veteran or buying in a targeted area ⁠¹⁠³.
• Next Home is funded through the mortgage-backed securities market. It pays 2.5% or 3.5% and is open to repeat buyers. It has county income limits but no purchase price limit, and it is not subject to federal recapture tax ⁠¹⁠³.
• Step Down offers only the bond-funded interest rate, with no assistance. It suits buyers who have their own down payment and want the lower rate ⁠¹⁠³.

The fourth, Next Step, is a one-time refinance for existing First Place and First Step borrowers. It is the only way to refinance without making the second mortgage come due ⁠¹⁠².

The assistance can pay the down payment, closing costs, prepaid items and the real estate agent’s commission. You cannot receive cash back at closing except money you put in yourself ⁠². IHCDA does let you layer other aid behind its loan: a city or nonprofit second loan takes third lien position, and a true grant needs no lien ⁠².

Credit score, debt ratio and loan fees under IHCDA’s matrix

IHCDA’s lender matrix sets the same credit floor for all three programs. You need a 660 FICO score for a debt-to-income ratio up to 45%, and 680 for a ratio from 45% to 50%. First Step and Step Down do not allow manual underwriting, so the loan must get an automated approval ⁠³. On the bond-funded loans (First Step and Step Down), the lender can charge at most a 1% origination fee plus $1,600 in other lender fees ⁠²⁠³. Every reservation costs a $250 fee that IHCDA does not refund ⁠².

IHCDA counts only the income of borrowers who will live in the home and sign the note. A non-occupying co-signer’s income is left out. Household size still counts dependents and anyone else who will live there. That works in your favor, because the 3+ person limit is higher ⁠². Only the borrowers on the loan application may take title. A spouse who is not on the loan cannot be added to the deed at closing ⁠².

How IHCDA’s 2026 county income and price limits work

The current tables took effect May 25, 2026 ⁠⁴. First Step, Step Down and Next Home FHA loans use a table with two household sizes (1-2 and 3+) and a price cap. Next Home conventional loans use a single income figure per county with no price cap ⁠⁵⁠⁶.

In non-targeted parts of most counties, the First Step income limit is $95,300 for 1-2 people and $109,595 for 3 or more. The highest non-targeted figures, $110,300 and $126,845, apply in the Indianapolis metro counties. The purchase price cap is $566,355 everywhere outside targeted areas ⁠⁵. Thirty counties are targeted in full, including Vigo, Wayne, Knox, Lawrence and Dearborn. Seventeen others, including Marion, Lake, Allen and St. Joseph, have targeted census tracts. Targeted areas allow up to $132,360 for 1-2 people and $154,420 for 3 or more, with a $692,211 price cap ⁠⁵. To check an address, use IHCDA’s targeted-area map and census tract list. The appraiser must note the tract on the appraisal ⁠²⁠⁸.

Scroll the table sideways to see every column.

Next Home has no purchase price limit; the price caps above apply to First Step and Step Down ⁠³. Next Home conventional limits range from $133,420 to $154,420 across the state ⁠⁶.

The first-time rule, veterans and targeted tracts

For First Step and Step Down, IHCDA counts you as first-time if you have had no ownership interest in your principal residence during the three years before closing. The rule applies only to people who sign the loan and will live in the home ⁠². It is waived in two cases. The first is an eligible veteran, meaning anyone who served in the active military, naval or air service or the Indiana National Guard without a dishonorable discharge, shown on a DD-214. The second is a buyer purchasing in a targeted area ⁠². Owning a single-wide mobile home that can still be towed does not count against you, but a double-wide owned in the last three years does ⁠². Next Home has no first-time requirement ⁠¹.

Recapture tax: who owes it and who does not

First Step and Step Down are funded by mortgage revenue bonds, so a federal recapture tax can apply. You owe it only if all three conditions are met: you sell within the first nine years, you make a profit, and your income that year is above the adjusted limit for your family size. The tax can never exceed 6.25% of the original loan amount or half of your gain, whichever is less ⁠². IHCDA gives you the recapture notice when it issues final approval ⁠². Next Home is not subject to recapture ⁠³.

Mortgage credit certificates are no longer issued

IHCDA’s current programs do not include a Mortgage Credit Certificate. IHCDA’s MCC page now handles only re-issuance: owners who refinance a loan that already had an MCC can ask for a new certificate ⁠¹⁠¹⁰. Program guides that included an MCC appear only in IHCDA’s archive of past guides ⁠¹.

City programs in Indianapolis, Bloomington and Gary

• Indianapolis: INHP Down Payment Assistance. The Indianapolis Neighborhood Housing Partnership offers assistance funded in part by the City of Indianapolis and HUD. You can get it only if you also take an INHP mortgage, and it depends on available funds. INHP’s 2026 income charts use Marion County limits effective June 1, 2026. The 120% of area median income chart runs from $92,650 for one person to $174,700 for eight ($132,350 for four). An 80% chart runs from $61,800 to $116,500 ($88,250 for four). INHP does not publish the dollar amount online ⁠¹¹.
• Bloomington: HAND Down Payment and Closing Cost Homeownership Program. This program lends up to $10,000 as a second mortgage that is forgiven 20% a year and fully after five years in the home. You must be a first-time buyer, meaning no real estate owned in the past three years. You must also complete the Homebuyers Club class and have income at or below 80% of area median income: $60,700 for one person and $86,700 for four on the chart updated April 24, 2026. A Shared Equity Homeownership Program serves buyers below 120% of median, up to $130,100 for four ⁠¹².
• Gary: GRDPA. The city uses ARPA funds for this program. A November 2025 ordinance amendment raised it to up to $30,000 for police, firefighters, EMS, teachers, healthcare workers and employees of the city, the Gary Sanitary District and the Gary/Chicago airport. Other buyers get up to 6% of the price, capped at $10,000. The home must be in one of Gary’s Qualified Census Tracts and must stay your primary residence for five years ⁠¹³. You must attend a 2026 city education workshop to receive the money. The city posted a notice of amendment to its first-time homebuyer program on Sept. 1, 2026, so confirm the current terms with Community Development ⁠¹⁴.

Applying for First Step or Next Home through a participating lender

1. Pick the program

   First-time buyers, veterans and targeted-area buyers can compare First Step’s 5% with Next Home’s lower assistance. Next Home has no price cap and no recapture tax. Repeat buyers outside targeted areas can use only Next Home ⁠¹⁠³.

2. Check your county limit

   Use the table that matches the loan: First Step, Step Down and Next Home FHA, or Next Home conventional. If you are near the cap, check whether your address is in a targeted tract ⁠⁴⁠⁵⁠⁶⁠⁸.

3. Call a participating lender

   IHCDA lists approved banks, credit unions and mortgage companies statewide. The loan officer pre-screens your credit, income and first-time status ⁠²⁠⁹.

4. Finish homebuyer education if your loan is conventional

   IHCDA accepts only certificates from Fannie Mae HomeView or Freddie Mac CreditSmart, and each occupying borrower needs one. IHCDA does not require a course on FHA loans ⁠²⁠³.

5. Sign a purchase contract, then have the lender reserve funds

   The lender locks the loan in IHCDA’s DMS Online system after you have a signed contract and pays or collects the $250 fee. Locks last 60 days, and once you are locked you cannot lock a new application for at least 60 days ⁠².

6. Supply documents

   These include the IHCDA Homeownership Affidavit, the appraisal, a signed loan application, a tri-merge credit report and your education certificate. IHCDA reviews files in the order received ⁠².

7. Close and keep the second-mortgage note

   You will need it, along with the recapture notice on bond loans, when you sell or refinance ⁠².

If one lender declines you, another participating lender may still approve you, because credit decisions are made by the lender under FHA, Fannie Mae or Freddie Mac rules ⁠². Programs in other states are compared on the first-time homebuyer grants page. Other Indiana guides are on the Indiana page.